Published Thursday 24th October 2019
As Brexit potentially nears its conclusion, one of the industries most anxious about its outcome will be the logistics sector. Not only could concerns regarding free EU trade hinder current practices, but there are mounting worries about its impact on the vehicle market.
Over the last few weeks, the Government has been forced into changes regarding its proposed tariffs on new EU HGVs in the event of a no-deal Brexit. The latest is that there will be a 10% tariff on such vehicles if no deal is agreed between the UK and the EU. At a time when the industry is under huge pressure to improve its sustainability, these charges could prove a sizeable stumbling block for UK logistics providers.
Increasing the Price of New Heavy Goods Vehicles
The charges on HGVs form part of an extensive tariff plan designed to “support the UK economy as a whole” in a no-deal scenario, according to a trade policy minister. Other products affected include clothing and bioethanol, although 88% of imports will keep or receive tariff-free access. When these plans were first released in March, HGV tariffs were planned for anywhere between 10% and 22%. Under increasing vocal pressure from industry leaders, that figure was eventually set at 10%, before reports emerged in early October claiming it had risen again to 16%. The Government has since clarified that the tariff is scheduled to be 10%. However, dismay resulting from this confusion has brought industry concerns to the forefront.
It is widely agreed that out of all tariffs, those on HGVs will be among the most impactful. The main reason for this is the sheer price of purchasing such vehicles, but the impact could be much further reaching than its tangible cost.
The Wider Effect of HGV Tariffs
Beyond Brexit, the biggest issue facing the logistics sector currently is sustainability. The introduction of clean air zones in many UK cities, amongst other measures, is pressuring many suppliers into early HGV purchases. This point was echoed by the chief executive of the Road Haulage Association, Richard Burnett. “Government is already forcing hauliers to upgrade their vehicles halfway through their working lifecycle to meet new clean air rules. These tariffs will see consumers facing higher prices in the shops as operators’ margins are squeezed even tighter”. This extra charge would be punishing for logistics providers even before the broader cost of a no-deal Brexit is taken into account.
There is also the issue of potential countermeasure tariffs by the European Union. If such action came into force, it is highly likely that the EU would place similar tariffs on new UK HGVs entering Europe following a no-deal Brexit. According to Dr Meredith Crowley of the University of Cambridge, 90% of commercial vehicles produced in the UK are sold to the EU. Any tariffs on these would be hugely damaging to the manufacturing sector. One of the most impacted industries during the Brexit process, the UK vehicle industry continues to slump under pressure from potential trade barriers. Tariffs such as these will only further the sector’s difficulties.
Preparing Businesses for Brexit Changes
It should be repeated that these provisions will only come into force if a no-deal Brexit occurs. However, given the volatile state of UK politics, such a scenario cannot and should not be ruled out by companies. With this in mind, industry leaders continue to pressure the Government into scrapping these tariff plans. The Freight Transport Association’s deputy CEO, James Hookham said “this is a tax on quality […] a 10% price increase on new trucks will hinder the logistics industry contribution to environmental savings. #ScraptheTariff completely is our message to Government.”
Regardless of Parliament’s actions, businesses need to keep in mind and continue preparing for any changes in the event of a no-deal Brexit, this month or in the future. Here at ERA, we have been working with major transport and logistics providers, helping to reduce their supply chain costs ahead of Brexit. Our fleet cost management experts can save you money in a range of cost areas, including vehicle procurement and whole life costs analysis. If you’re interested in seeing what our specialists could do for you, why not get in contact with our dedicated UK team today?